1. Technical Field
The present invention relates to collection and administration of taxes resulting from transactions between sellers and buyers of goods and services, and further relates to enforcement of compliance with tax laws of jurisdictions who are legal parties to such transactions.
2. Related Art
Buyers of goods and services are becoming quite sophisticated about making purchases of products from sellers who are located outside of the buyer's sales or consumption tax imposing jurisdiction. For example, many buyers purchase products on the Internet. The seller is not responsible for the collection of tax from buyers outside of their jurisdiction, so no sales or consumption tax is collected. Many buyers of goods and services are technically responsible for the voluntary payment of a “use tax” on such purchases, but fail to pay such taxes to the tax imposing jurisdiction in which they reside either because the buyers are not aware of laws governing use tax, or the buyers are simply not going to voluntarily comply with such laws. Thus, tax imposing jurisdictions are experiencing a decline in reported taxable transactions involving goods and services and an associated decline in tax revenues. Each tax imposing jurisdiction finds it difficult to force compliance, since no comprehensive system of compliance currently exists to require buyers and sellers to comply with the applicable laws that should be applied to the transactions in question.
In addition, tax imposing jurisdictions, as well as sellers serving as tax agents for the tax imposing jurisdictions, incur substantial collection, administrative, and compliance costs relating to taxes due to the complexity of tax laws which are different across different tax imposing jurisdictions.
Thus, there is a need for a method and system that enables a tax imposing jurisdiction to collect taxes from a buyer residing therein for a transaction between the buyer and seller, where the seller is not legally responsible for the collection of such tax. There is also a need for a method and system that simplifies the collection, administration, and compliance process relating to such taxes, while taking into consideration the reality that tax laws will vary among different tax imposing jurisdictions, reflecting the needs of different tax imposing jurisdictions.